VIP Entertainment Technologies Inc. — Audit Report / Information 2021

Jul 30, 2021

ANC CAPITAL VENTURES INC.

Financial Statements

Years Ended March 31, 2021 and 2020

(Expressed in Canadian Dollars)

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INDEPENDENT AUDITOR’S REPORT

To the Shareholders of ANC Capital Ventures Inc.

Opinion

We have audited the financial statements of ANC Capital Ventures Inc. (the “Company”), which comprise the statements of financial position as at March 31, 2021 and 2020, and the statements of operations and comprehensive loss, changes in equity, and cash flows for the years then ended and notes to the financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the Company as at March 31, 2021 and 2020, and its financial performance and its cash flows for the years then ended in accordance with International Financial Reporting Standards.

Basis for Opinion

We conducted our audits in accordance with Canadian generally accepted auditing standards. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company in accordance with the ethical requirements that are relevant to our audit of the financial statements in Canada, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Material Uncertainty Related to Going Concern

We draw attention to Note 1 in the financial statements, which indicates that the Company has not generated any revenue and has incurred a net loss of $72,180 during the year ended March 31, 2021, and has an accumulated deficit of $162,719 and no current business as at March 31, 2021. As stated in Note 1 of the financial statements, these events or conditions, along with other matters as set forth in Note 1, indicate that a material uncertainty exists that may cast significant doubt on the Company’s ability to continue as a going concern. Our opinion is not modified in respect of this matter.

Other Information

Management is responsible for the other information. The other information comprises the information included in the Management’s Discussion and Analysis, but does not include the financial statements and our auditor’s report thereon.

Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information, and in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

Responsibilities of Management and Those Charged with Governance for the Financial Statements

Management is responsible for the preparation and fair presentation of the financial statements in accordance with International Financial Reporting Standards, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, management is responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.

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Those charged with governance are responsible for overseeing the Company’s financial reporting process.

Auditor’s Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

• Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company to cease to continue as a going concern.

• Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

The engagement partner on the audit resulting in this independent auditor’s report is Henry Chow.

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Saturna Group Chartered Professional Accountants LLP

Vancouver, Canada

July 29, 2021

ANC CAPITAL VENTURES INC. STATEMENTS OF FINANCIAL POSITION (EXPRESSED IN CANADIAN DOLLARS)

	March 31,	March 31,
	2021	2020
	$	$
Assets
Current assets
Cash and cash equivalents	284,647	316,047
Prepaid expenses	10,500	–
Total assets	295,147	316,047
Liabilities
Accounts payable and accrued liabilities	51,280	–
Total liabilities	51,280	–
Shareholders’ equity
Share capital	353,967	353,967
Share-based payment reserve	52,619	52,619
Deficit	(162,719)	(90,539)
Total shareholders’equity	243,867	316,047
Total liabilities and shareholders’ equity	295,147	316,047

Nature and continuance of operations (Note 1) Qualifying transaction (Note 7)

Approved and authorized for issuance by the Board of Directors on July 29, 2021:

Signed “Jim Sekora”

Signed “Randy Clifford”

Jim Sekora Randy Clifford Director Director

(The accompanying notes are an integral part of these financial statements)

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ANC CAPITAL VENTURES INC. STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (EXPRESSED IN CANADIAN DOLLARS)

	Year ended	Year ended
	March 31,	March 31,
	2021	2020
	$	$
Expenses
General and administrative	86	910
Professional fees	57,324	32,319
Transfer agent and filing fees	14,770	31,300
Total expenses	72,180	64,529
Net loss and comprehensive loss	(72,180)	(64,529)
Lossper share,basic and diluted	(0.01)	(0.02)
Weighted average number of shares outstanding	5,600,000	2,807,650

(The accompanying notes are an integral part of these financial statements)

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ANC CAPITAL VENTURES INC. STATEMENTS OF CHANGES IN EQUITY (EXPRESSED IN CANADIAN DOLLARS)

	Share capital Share-based payment reserve $ Deficit $ Total $ Number of Shares Amount $
Balance, March 31, 2019 Issuance of shares for cash Share issuance costs Net loss for the year	2,100,000 105,000 26,010 (26,010) 105,000 3,500,000 350,000 – – 350,000 – (101,033) 26,609 – (74,424) – – – (64,529) (64,529)
Balance, March 31, 2020 Net loss for the year	5,600,000 353,967 52,619 (90,539) 316,047 – – – (72,180) (72,180)
Balance,March 31,2021	5,600,000 353,967 52,619 (162,719) 243,867

(The accompanying notes are an integral part of these financial statements)

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ANC CAPITAL VENTURES INC. STATEMENTS OF CASH FLOWS EXPRESSED IN CANADIAN DOLLARS

	Year ended	Year ended
	March 31,	March 31,
	2021	2020
	$	$
Operating activities
Net loss	(72,180)	(64,529)
Changes in non-cash working capital:
Prepaid expenses	(10,500)	–
Accounts payable and accrued liabilities	51,280	–
Net cash used in operating activities	(31,400)	(64,529)
Financing activities
Proceeds from issuance of shares	–	350,000
Share issuance costs	–	(74,424)
Net cash provided by financing activities	–	275,576
Change in cash and cash equivalents	(31,400)	211,047
Cash and cash equivalents, beginning of year	316,047	105,000
Cash and cash equivalents,end ofyear	284,647	316,047
Cash and cash equivalents are comprised of:
Cash in bank	274,647	311,373
Cash held in lawyer’s trust account	10,000	4,674
Total cash and cash equivalents	284,647	316,047

(The accompanying notes are an integral part of these financial statements)

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ANC CAPITAL VENTURES INC. NOTES TO THE FINANCIAL STATEMENTS YEARS ENDED MARCH 31, 2021 AND 2020 EXPRESSED IN CANADIAN DOLLARS

1. NATURE OF BUSINESS AND CONTINUANCE OF OPERATIONS

ANC Capital Ventures Inc. (the “Company’) was incorporated on March 11, 2019 pursuant to the provisions of the Business Corporations Act (British Columbia). The Company was formed to complete an Initial Public Offering (“IPO”) and become classified as a Capital Pool Company (“CPC”) as defined by TSX Venture Exchange (“TSXV”) Policy 2.4. The Company will not carry on any business other than the identification and evaluation of assets or businesses with a view to completing a Qualifying Transaction (“QT”). On January 17, 2020, the Company completed its IPO and that its shares were listed for trading on the TSXV. The head office and the registered office of the Company is located at 10th Floor, 595 Howe Street, Vancouver, BC, V6C 2T5.

As at March 31, 2021, the Company has no business operations. As a CPC, the Company’s principal business objective will be to identify and evaluate assets, properties or businesses with a view to a potential acquisition or participation by completing a QT subject, in certain cases, to shareholders’ approval and acceptance by the TSXV. There is no assurance that the Company will identify and successfully acquire businesses or assets that will produce a profit. Moreover, if a potential business or asset is identified which warrants acquisition or participation, additional funds may be required to complete the acquisition or participation and the Company may not be able to obtain such financing on terms which are satisfactory to the Company.

Under the policies of the TSXV, the Company must identify and complete a Qualifying Transaction within 24 months from the date the Company’s shares are listed for trading on the TSXV. There is no assurance that the Company will be able to complete a QT within this time period, or that it will be able to secure the necessary financing to complete a QT. The TSXV may suspend or de-list the Company’s shares from trading should it not meet these requirements.

On March 11, 2020, the World Health Organization declared COVID-19 a global pandemic. This contagious disease outbreak and any related adverse public health developments, has adversely affected workforces, economies, and financial markets globally, leading to an economic downturn. The impact on the Company has not been significant, but management continues to monitor the situation.

Going Concern

These financial statements have been prepared on the going concern basis, which assumes that the Company will be able to realize its assets and discharge its liabilities in the normal course of business. During the year ended March 31, 2021, the Company had no revenues and incurred a net loss of $72,180. As at March 31, 2021, the Company has no current business and has an accumulated deficit of $162,719. The Company’s continuing operations are dependent upon its ability to complete its IPO and identify, evaluate, and negotiate a QT. If the QT is identified or completed, additional funding may be required and there is no assurance that the Company will be able to obtain such financing, if any, on terms that are acceptable to the Company. These factors indicate the existence of a material uncertainty that may cast significant doubt on the ability of the Company to continue as a going concern. These financial statements do not include any adjustments to the recorded assets or liabilities that might be necessary should the Company be unable to continue as a going concern.

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ANC CAPITAL VENTURES INC. NOTES TO THE FINANCIAL STATEMENTS YEARS ENDED MARCH 31, 2021 AND 2020 EXPRESSED IN CANADIAN DOLLARS

2. SIGNIFICANT ACCOUNTING POLICIES

• (a) Statement of Compliance and Basis of Presentation

The accompanying financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board. The financial statements have been prepared on a historical cost basis and are presented in Canadian dollars, which is also the Company’s functional currency.

• (b) Use of Estimates and Judgments

The preparation of these financial statements in conformity with IFRS requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and reported amounts of expenses during the period. It also requires management to exercise its judgment in the processing of applying the Company’s accounting policies. Estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The impacts of such estimates and judgments are pervasive throughout the financial statements, and may require accounting adjustments based on future occurrences. Revisions to accounting estimates and judgments are recognized in the period in which the estimate is revised and future periods if the revision affects both current and future periods. Actual results could differ from these estimates.

Significant areas requiring the use of estimates include the fair value of share-based compensation and unrecognized deferred income tax assets.

The Company’s assessment of whether the going concern assumption is appropriate requires management to take into account all available information about the future, which is at least, but not limited to, 12 months from the end of the reporting period. The Company is aware that material uncertainties related to events or conditions may cast significant doubt upon the Company’s ability to continue as a going concern.

• (c) Cash and Cash Equivalents

The Company considers all highly liquid instruments with a maturity of three months or less at the time of issuance, are readily convertible to a known amount of cash, and which are subject to insignificant risk of changes in value to be cash equivalents.

• (d) Financial Instruments

– Classification and measurement initial recognition

On initial recognition, all financial assets and liabilities are classified and recorded at fair value, net of attributable transaction costs, except for financial assets and liabilities classified as at fair value through profit or loss (“FVTPL”).

– Classification and measurement subsequent to initial recognition

Subsequent measurement of financial assets and liabilities depends on their classification and measurement basis.

Financial assets

Subsequent to initial recognition, financial assets are measured at amortized cost, fair value through other comprehensive income, or fair value through profit or loss, depending on the business model in which a financial asset is managed and its contractual cash flow characteristics.

A financial asset is measured at amortized cost if both of the following conditions are met:

• a) the financial asset is held within a business model whose objective is to hold financial assets in order to collect contractual cash flows; and

• b) the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

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ANC CAPITAL VENTURES INC. NOTES TO THE FINANCIAL STATEMENTS YEARS ENDED MARCH 31, 2021 AND 2020 EXPRESSED IN CANADIAN DOLLARS

2. SIGNIFICANT ACCOUNTING POLICIES (continued)

• (d) Financial Instruments (continued)

Financial assets (continued)

A financial asset shall be measured at fair value through other comprehensive income if both of the following conditions are met:

• a) the financial asset is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets; and

• b) the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

Financial assets that do not meet the above conditions are classified as fair value through profit or loss. The Company’s cash and cash equivalents is measured at amortized cost.

Financial liabilities

Subsequent to initial recognition, financial liabilities are measured at amortized cost, unless designated as fair value through profit or loss. The Company’s accounts payable and accrued liabilities is measured at amortized cost.

Impairment of financial assets

The Company applies the expected credit loss (“ECL”) model to its financial assets measured at amortized cost. Under the ECL model, loss allowances are measured on either of the following bases:

• 12-month ECLs: result from possible default events within the 12 months after the reporting date; and

• lifetime ECLs: result from all possible default events over the expected life of a financial instrument.

Upon recognition of a financial asset, 12-month ECLs are recognized in the statement of operations and a loss allowance is established. At each reporting date, if the credit risk associated with a financial asset has increased significantly and is not considered low, lifetime ECLs are recognized in the statement of operations.

• (e) Income Taxes

Current income tax

Current income tax assets and liabilities for the current period are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted, at the reporting date. Current income tax relating to items recognized directly in other comprehensive income or equity is recognized in other comprehensive income or equity and not in the statement of operations. Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate.

Deferred income tax

Deferred income tax is provided using the statement of financial position method on temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. The carrying amount of deferred income tax assets is reviewed at the end of each reporting period and recognized only to the extent that it is probable that sufficient taxable income will be available to allow all or part of the deferred income tax asset to be utilized. Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. Deferred income tax assets and deferred income tax liabilities are offset, if a legally enforceable right exists to set off current tax assets against current income tax liabilities and the deferred income taxes relate to the same taxable entity and the same taxation authority.

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ANC CAPITAL VENTURES INC. NOTES TO THE FINANCIAL STATEMENTS YEARS ENDED MARCH 31, 2021 AND 2020 EXPRESSED IN CANADIAN DOLLARS

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

• (f) Loss Per Share

Basic loss per share is computed by dividing the net income or loss applicable to common shares of the Company by the weighted average number of common shares outstanding for the relevant period. Diluted loss per share is computed by dividing the net income or loss applicable to common shares by the sum of the weighted average number of common shares issued and outstanding and all additional common shares that would have been outstanding, if potentially dilutive instruments were converted. Potentially dilutive securities are excluded from the calculation of dilutive loss per share as they are anti-dilutive. As at March 31, 2021 and 2020, the Company has 905,000 potentially dilutive shares outstanding.

• (g) Comprehensive Income (Loss)

Comprehensive income (loss) is the change in the Company’s net assets that results from transactions, events and circumstances from sources other than the Company’s shareholders and includes items that are not included in the statement of operations. The Company does not have any items affecting comprehensive income or loss.

• (h) Share-based Payments

The Company grants share-based awards to employees and directors as an element of compensation. The fair value of the awards is recognized over the vesting period as share-based compensation expense and sharebased payment reserve. The fair value of share-based payments is determined using the Black-Scholes option pricing model using estimates at the date of the grant. At each reporting date prior to vesting, the cumulative expense representing the extent to which the vesting period has expired and management’s best estimate of the awards that are ultimately expected to vest is computed. The movement in cumulative expense is recognized in the consolidated statement of operations with a corresponding entry within equity, against share-based payment reserve. No expense is recognized for awards that do not ultimately vest. When stock options are exercised, the proceeds received, together with any related amount in share-based payment reserve, are credited to share capital.

Share-based payments arrangements in which the Company receives goods or services as consideration for its equity instruments are accounted for as equity-settled share-based payment transactions, unless the fair value cannot be estimated reliably. If the Company cannot reliably estimate the fair value of the goods or services received, the Company will measure their value by reference to the fair value of the equity instruments granted.

• (i) Accounting Standards Issued But Not Yet Effective

A number of new standards, and amendments to standards and interpretations, are not yet effective for the year ended March 31, 2021. These accounting standards or amendments to existing accounting standards that have been issued but have future effective dates are either not applicable or are not expected to have a significant impact on the Company’s financial statements.

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ANC CAPITAL VENTURES INC. NOTES TO THE FINANCIAL STATEMENTS YEARS ENDED MARCH 31, 2021 AND 2020 EXPRESSED IN CANADIAN DOLLARS

3. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT

The Company is exposed in varying degrees to a variety of financial instruments and related risks. Those risks and management’s approach to mitigating those risks are as follows:

• (a) Fair Values

Fair value measurements are classified using a fair value hierarchy that reflects the significance of inputs used in making the measurements. The fair value hierarchy has the following levels:

• Level 1 - valuation based on quoted prices (unadjusted) in active markets for identical assets or liabilities;

• Level 2 - valuation techniques based on inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and

• Level 3 - valuation techniques using inputs for the asset or liability that are not based on observable market data (unobservable inputs).

The fair values of financial instruments, which includes cash and cash equivalents, and accounts payable and accrued liabilities, approximate their fair values due to the relatively short-term maturity of these instruments.

• (b) Credit Risk

Financial instruments that potentially subject the Company to a concentration of credit risk consists of cash and cash equivalents. The Company limits its exposure to credit loss by placing its cash and cash equivalents with a high credit quality financial institution or within a legal trust account. The carrying amount of financial assets represents the maximum credit exposure.

• (c) Foreign Exchange Rate Risk

Foreign currency risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate due to changes in foreign exchange rates. The Company is not exposed to any significant foreign exchange rate risk.

• (d) Interest Rate Risk

Interest rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company is not exposed to significant interest rate risk as it does not have any liabilities with variable rates.

• (e) Liquidity Risk

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Company plans on settling its financial obligations out of cash and relies on the Company raising debt or equity financing in a timely manner to maintain cash in excess of anticipated needs. There is no assurance that financing will be available or, if available, that financing will be on terms acceptable to the Company.

4. SHARE CAPITAL

Authorized: unlimited common shares without par value unlimited preferred shares without par value

On January 17, 2020, the Company issued 3,500,000 common shares through its IPO at $0.10 per share for proceeds of $350,000. As part of the IPO, the Company incurred share issuance fees of $74,424 and issued 350,000 broker’s options with a fair value of $26,609, calculated using the Black-Scholes option pricing model assuming no expected dividends or forfeitures, an expected life of two years, volatility of 164%, risk free rate of 2.29%. Each broker’s option is exercisable at $0.10 per common share expiring on January 16, 2022.

In accordance with TSX-V Policy 2.4 for Capital Pool Companies, the Company is limited to the lesser of 30% of gross proceeds raised from the sale of securities or $210,000 for expenditures that are not related to valuations or appraisals, business plans, feasibility studies and technical assessments, sponsorship reports, geological reports, financial statements, fees for legal and accounting services, and agent’s fees, costs, and commissions.

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ANC CAPITAL VENTURES INC. NOTES TO THE FINANCIAL STATEMENTS YEARS ENDED MARCH 31, 2021 AND 2020 EXPRESSED IN CANADIAN DOLLARS

5. STOCK OPTIONS

The Company has established a stock option plan (the “Plan”) for its directors, executive officers, employees and consultants under which the Company may grant up to 560,000 stock options until the completion of the qualifying transaction which increases to 10% of the total issued and outstanding common shares of the Company after the completion of the qualifying transaction.

						Weighted average
					Number of	exercise price
					options	$
Outstanding,March	31,	2019,	2020,and	2021	555,000	0.10

Additional information regarding stock options outstanding as at March 31, 2021, is as follows:

		Weighted average
Range of exercise	Stock options	remaining contracted
prices	outstanding and	life
$	exercisable	(years)
0.10	555,000	8.2

Broker’s Options

						Weighted average
					Number of	exercise price
					options	$
Outstanding, March	31,	2019			–	–
Granted					350,000	0.10
Outstanding,March	31,	2020	and	2021	350,000	0.10

Additional information regarding broker options outstanding as at March 31, 2021, is as follows:

		Weighted average
Range of exercise	Stock options	remaining contracted
prices	outstanding and	life
$	exercisable	(years)
0.10	350,000	0.8

6. CAPITAL MANAGEMENT

The Company manages its capital to maintain its ability to continue as a going concern and to provide returns to shareholders and benefits to other stakeholders. The capital structure of the Company consists of cash and cash equivalents and shareholders’ equity.

The Company manages its capital structure and makes adjustments to it in light of economic conditions. The Company, upon approval from its Board of Directors, will balance its overall capital structure through new share issues or by undertaking other activities as deemed appropriate under the specific circumstances. The Company is subject to externally imposed capital requirements under Policy 2.4 of the TSX-V for Capital Pool Companies and the Company’s overall strategy with respect to capital risk management remains unchanged from the year ended March 31, 2020.

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ANC CAPITAL VENTURES INC. NOTES TO THE FINANCIAL STATEMENTS YEARS ENDED MARCH 31, 2021 AND 2020 EXPRESSED IN CANADIAN DOLLARS

7. QUALIFYING TRANSACTION

On March 5, 2021 (as amended on June 7, 2021 and July 14, 2021), the Company entered into a non-binding term sheet (the “Term Sheet”) with VIP Entertainment Group Inc. (“VIP Entertainment”) dated February 16, 2021. Pursuant to the Term Sheet, the Company and VIP Entertainment intend to complete a business combination intended to constitute the Company’s QT (the “Proposed Transaction”). The Proposed Transaction will result in the Company acquiring all of the issued and outstanding equity shares of VIP Entertainment at a ratio of 1.16739 (the “Exchange Ratio”) common shares of the Company for each common share of VIP Entertainment. Outstanding convertible securities of VIP Entertainment will be exchanged into common shares of the Company using the Exchange Ratio. The Company is required to have a minimum of $180,000 of working capital as at the closing date of the agreement, which is to be no later than October 1, 2021.

8. INCOME TAXES

The tax effect (computed by applying the Canadian federal and provincial statutory rate) of the significant temporary differences, which comprise deferred income tax assets and liabilities, are as follows:

	2021	2020
	$	$
Canadian statutory income tax rate	27%	27%
Income tax recovery at statutory rate	(19,489)	(17,425)
Tax effect of:
Permanent difference and other	(7,021)	(20,094)
Change in unrecognized deferred income tax assets	26,510	37,519
Income taxprovision	–	–
The significant components of deferred income tax assets and liabilities are as follows:
	2021	2020
	$	$
Deferred income tax assets
Non-capital losses carried forward	51,972	21,442
Share issuance costs	12,057	16,077
Unrecognized deferred income tax assets	(64,029)	(37,519)
Net deferred income tax asset	–	–

As at March 31, 2021, the Company has $192,489 of non-capital losses carried forward which are available to offset future years’ taxable income. The non-capital losses expire as follows:

	$
2039	26,010
2040	79,414
2041	87,065
	192,489

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